Repeat Bank Stress Tests 'Right Now': TARP Panel Chair
The Congressionally-appointed panel overseeing the Troubled Asset Relief Program (TARP) recommends running again the stress tests on US banks, as economic conditions have worsened, its chair, Harvard University professor Elizabeth Warren, told CNBC Tuesday.
"We actually make recommendations to do it all over again right now," Warren told "Squawk Box."
"We've already blown past the worst-case scenario on unemployment," she added.
Under the tests, whose results were released in May, the Obama administration asked federal regulators to examine how financial institutions would hold up under two different economic scenarios as well as how much new capital they would need to raise to shore up their balance sheets.
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The tests concluded that ten banks — including some of the biggest, such as Citigroup, Bank of America and Wells Fargo — would need to raise almost $75 billion in capital; the firms were also required to present plans on how to do so by June 8. The government is prepared to loan money to those companies that are unable to raise capital from private sources.
The oversight panel's report noted that the unemployment rate is now 9.4 percent, with a 2008 average of 8.5 percent. "If the monthly rate continues to increase during the remainder of this year, it will likely exceed the 2009 average of 8.9 percent assumed under the more adverse scenario," the report said.
The report will be presented in its final form to the Joint Economic Committee of Congress Tuesday.
Other reasons for concern are that the model used in the Treasury's stress tests stretches on less than two years, while many commercial mortgages are coming up in 2011, 2012 and 2013, Warren said.
Although the Treasury has been more transparent on this than at any point in its history, more details are needed to boost transparency, she added.
"They need to give us more information, when you've got more information, you've got confidence," Warren said.